Wall St turns lower on mixed economic data and commentary from JP Morgan CEO. Prices of commodities complex rally amid recession concerns.
Good morning. I’m Melissa Darmawan for Finance News. This is your market outlook.
The Australian sharemarket is set to retreat after Wall St slipped on mixed economic data.
Wall St turns lower as “hurricane” outlook weighs
US stocks fell on the first day of June and for the final month of the second quarter. The moves today were much calmer compared to May, however jitters still remain around the outlook ahead.
Volumes are light which means that reactions are extra sensitive, however, stocks turned lower after JPMorgan CEO Jamie Dimon said that the economy is set for a “hurricane”, amid investors attempting to price in the impact of the balance sheet unwind starting this week – we will touch on that shortly.
The energy sector was the outperformer on the S&P 500 while financials were the worst. Gold looked mighty shiny as inflation concerns remained front of mind, all this ahead of the jobs report this Friday.
At the closing bell, the Dow Jones lost 0.5 per cent to 32,813, the S&P 500 fell 0.8 per cent to 4,101 and the Nasdaq lost 0.7 per cent to 11,994.
Why the reaction?
Investors are weighing up what will happen to the equities and bond markets once the balance sheet starts to unwind this week.
This means that liquidity is set to be zapped from the market which was one of the main drivers as to why we saw a strong run across equity markets around the globe. Therefore, if what drove the market higher is set to be removed, would that mean that there will be more selling?
Right now, investors have baked in two 50 basis point hikes in the coming meetings. If the central bank raises interest rates by that amount, that’s fine. If it’s less, then the market has done some of the work for the Fed. If it’s more, the surprise is going to see a reaction. This is what is driving the volatility, the uncertainty.
Yes, we have a data dependent Federal Reserve focused on combating inflation over the growth of the economy, however, until investors know what the next move is, we are going to see a bit of trepidation in the market. Consumer sentiment has fallen for four months in a row as per the University of Michigan. Investors are feeling the pain, and will react to good and bad news. Right now, bad news is needed to see good news, that is, inflation to come down from multi year highs to the central bank’s target rate.
Let’s have a look at what this means for the Aussie market today.
Figures around the globe
Across the Atlantic, European markets closed lower. Paris lost 0.8 per cent, Frankfurt fell 0.3 per cent while London’s FTSE dropped almost 1 per cent.
On the London Stock Exchange, Rio added 0.1 per cent, BP lost 0.7 per cent and Shell also fell 0.7 per cent.
Asian markets closed mixed, Tokyo’s Nikkei added 0.7 per cent, Hong Kong’s Hang Seng fell 0.6 per cent while China’s Shanghai Composite lost 0.1 per cent.
Yesterday, the Australian sharemarket closed 0.3 per cent higher at 7,234.
Taking all of this into the equation, the SPI futures are pointing to 0.8 per cent fall.
What to look out for today
April international trade figures are due today from the Australian Bureau of Statistics.
Despite the SPI futures pointing to a fall, what could save the local index is investor’s optimism around our resources sector. Goldman cites BHP’s (ASX:BHP) attractive valuation and free cash flow and stamped the miner with a buy rating and price target of $51.20. Also the underlying commodity prices for iron ore, gold and oil have moved higher. Keep an eye out for Melbana Energy (ASX:MAY), and gold miner, North Stawell (ASX:NSM) today.
In company news that broke after market close. Pilbara Minerals (ASX:PLS) has named Dale Henderson as the managing director and chief executive officer. Outgoing CEO, Ken Brinsden will step down from the role at the end of July.
President Biden has continued to focus on the shortage of baby formula. We have seen Bubs Australia (ASX:BUB), A2 Milk (ASX:A2M) share prices consolidate yesterday. As well Australian Dairy Nutritionals Group (ASX:AHF) It could be a buying opportunity today if you want to jump in on the wagon.
Wesfarmers (ASX:WES) has their strategy briefing scheduled with eyes on how input pressures are set to play a role across their retailers.
Lastly, Ramsay Health (ASX:RHC) is in the spotlight amid M&A talks continuing.
There is one company set to trade without the right to its dividend.
Technology One (ASX:TNE) is paying 4.2 cents 60 per cent franked
Iron ore futures point to a 2.2 per cent gain.
Gold has gained $1.80 or 0.1 per cent to US$1850 an ounce. Silver was up $0.18 or 0.8 per cent to US$21.87 an ounce.
Oil has added $0.09 or 0.1 per cent to US$114.76 a barrel.
One Australian Dollar at 7:05 AM has weakened slightly since yesterday, buying 71.78 US cents (Wed: 71.79 US cents), 57.49 Pence Sterling, 93.43 Yen and 67.39 Euro cents.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics